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28th April 2015

Singapore Real Estate

Loans growth estimate cut to 6% this
year

Source: Business Times / Companies & Markets

DBS Group Holdings expects 6 per cent loans
growth for 2015, said chief executive Piyush Gupta on Monday. That is down from
the previous estimate of 8 per cent, he said at a press conference following
the bank's Q1 results.

"We
should grow the loan book, in constant-currency terms, 6 per cent for full
year," said Mr Gupta.

At 6
per cent, it would be the slowest loan expansion since 2009. Mr Gupta was
appointed DBS chief executive in November 2009. In 2009, a challenging year
following the 2008 global financial crisis, DBS still managed to increase its
loan book by 3 per cent as Asia bounced back in a V-shaped recovery in the
second half.

Customer loans growth in 2014 was 11 per
cent. Gross customer loans grew 2 per cent during Q1 2015 to S$284 billion due
to currency effects. Loans were little changed in constant-currency terms.

Growth
in regional corporate loans and Singapore housing loans was offset by a decline
in trade loans.

DBS
said trade loans fell 8 per cent on quarter to S$46 billion due to the
contraction in China trade as growth slowed in the world's second largest
economy and commodity prices fell. Another factor was the onshore-offshore
renminbi interest rate convergence.

But
non-trade loans are increasing across the region, Mr Gupta said. A lot of the
non-trade loans are syndicated deals, he said.

In Q1,
DBS was one of three banks to close a US$1.5 billion term loan facility for
Formosa Group, Taiwan's largest conglomerate. Another syndicated deal was the
HK$4 billion facility for Hong Kong's Kingboard Laminates Holdings, an
electronic materials manufacturer.

DBS
also saw strong demand for Singapore mortgages.

"New
(mortgage) bookings in Q1 was the strongest . . . in many quarters," he
said, adding that in Q1, new bookings came to S$2.1 billion to S$2.2 billion.

The
bank is gaining market share in home loans; it's now at 24.56 per cent, he
said.

Mortgages
grew to S$53.9 billion at end-March 2015, up from S$52.9 billion and S$49.8
billion at end-2014 and March 31, 2014, respectively.

DBS has
the smallest housing loan book among the three local banks. The housing loan
books of rivals United Overseas Bank (UOB) and OCBC Bank were S$54.7 billion
and S$54.2 billion respectively as at end-2014. UOB and OCBC will report first
quarter results on Thursday.

DBS'
sales of new home loans were mainly refinancing deals to fixed rate loans from
floating rate packages. About one third of new home loans were on fixed rate
loans, Mr Gupta said.

DBS
sells three-year fixed rate loans at 2.18 per cent per annum. Not many banks
can fix the interest rates for three years but DBS can because of its large
deposits, Mr Gupta said.

DBS,
South-east Asia's largest bank, saw customer deposits rise 2 per cent from the
previous quarter and 8 per cent from a year ago to S$324 billion.